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New evidence of business case for adopting Living Wage

26th January 2015, 11:12

A new report reinforcing the business case for employers to adopt the Living Wage has been published, highlighting how UK employers paying the Living Wage benefit from improved staff morale, retention and productivity – resulting in long-term business benefits.

The knowledge exchange project, carried out by the University of Strathclyde and the Living Wage Foundation – and commissioned by Barclays – uses case studies demonstrating business benefits and examples of how to mitigate associated costs.

Key findings include:

  • Implementing the LW encourages businesses to re-evaluate their approaches to staffing and payment [or similar] in the UK, leading to more effective and efficient working patterns in the long term
  • Implementing the Living Wage encourages businesses to re-evaluate their business model, leading to more effective and efficient working patterns in the long term
  • Increased skills development among existing staff
  • Increased staff performance and job satisfaction
  • Increased staff retention
  • Long-term reputational benefits for Living Wage employers

The study included evidence from five major accredited Living Wage employers, covering more than 327,000 staff, and a member of the Living Wage Foundation’s Service Provider Recognition programme.

Mike Kelly, Chairman of the Living Wage Foundation and Director of Living Wage at KPMG, said:

There are many businesses who would like to pay the Living Wage but feel they are unable to do so due to perceived associated costs. While the report accepts initial costs of implementing the Living Wage can be an issue for companies, it clearly demonstrates the business benefits of becoming a Living Wage employer and provides working examples of how businesses can mitigate those additional costs.

Deputy First Minister John Swinney MSP, who attended the launch of the report in Scotland, said:

Tackling low pay is a key priority of the Scottish Government and we fully support the living wage campaign. Just this week the First Minister visited Scotland’s 100th Living Wage accredited company which demonstrates we are making real progress on this agenda. We recognise the real difference the Living Wage makes to the people of Scotland which is why we are the first Scottish Government ever to pay the living wage to all employees.The knowledge exchange project, carried out by the University of Strathclyde and the Living Wage Foundation – and commissioned by Barclays –gives evidence of the business benefits of paying the Living Wage. It isn't simply good for individuals, it is also good for companies. It helps to increase staff retention, reduce absenteeism and enhance businesses reputation.

 Dr Andrea Coulson, Senior Lecturer of Accounting at the University of Strathclyde and primary author of the report, said: 

Reducing in-work poverty is a serious challenge for business and there is no doubt that paying a Living Wage and improving employee working conditions is an important step in the right direction. The report highlights detailed case study evidence of how costs of adopting the Living Wage are being mitigated and value created for employers, their employees and on-site contract staff.

Since rolling out the Living Wage to all full-time staff and suppliers, including on-site contractors, KPMG has seen an increase in employee motivation, higher employee retention, and reduced absenteeism. This in turn has resulted in lower recruitment costs, more opportunities for staff development and the opportunity for KPMG to mitigate costs by broadening responsibilities of current staff. The firm has also seen improvements in bottom line performance in both financial and non-financial indicators such as employee engagement and overall customer satisfaction levels.

Jenny Stewart, Head of Infrastructure and Government at KPMG, said:

KPMG has been firmly committed to the Living Wage principle for many years.  We have been paying the Living Wage to our own staff since 2006 and ensuring it is paid by sub-contractors since 2007.  We have seen the benefits.  Facilities Management staff satisfaction levels are higher than before and as a result the business has become more efficient.  During the first year of implementation, turnover in our cleaning staff dropped from 44% to 27%. Absenteeism has also since dropped by 10%. Our suppliers are also benefiting from being associated with Living Wage and are now experiencing greater numbers of applicants to fill vacancies then previously.

Other case studies featured in the Living Wage report include Barclays, Aviva, Penrose Care, Enhance Office Cleaning and SSE.

Dominic Johnson, Employee Relations Director at Barclays, commented:

Not only is paying people who work on our behalf a wage that supports a decent standard of living a responsible thing to do, there are also clear business, societal and economic benefits to doing so. We are pleased to support this knowledge exchange project conducted by the University of Strathclyde and the Living Wage Foundation which investigates further the qualitative and quantitative benefits to businesses of paying the Living Wage, and hope that the Living Wage continues to gain increased support from the business community.